Britain's railway system has become an incomprehensible structure which urgently requires a rationalisation of its 25 train operating companies.

Many are offshoots of bus companies and have no idea how to run a railway, still less a positive attitude to passengers, while others have simply chanced their arm and landed themselves with big debts: latest figures show they are collectively around £120m in deficit.

They survived at the start by sacking thousands of people, but quickly found that it was not easy to run services without drivers. In many companies, with notable exceptions, customer service has not been a priority.

Peel away the 25 train companies and you find that they are controlled by 12 franchisees, comprising some of the biggest bus and train operators. They are the real power brokers, out of which only a handful will eventually run the trains.

Many are bolstered by an annual subsidy from the government which has gradually been reduced from £2bn at the time of privatisation to £950m this year. The subsidy is largely for rural or non-profitable lines. Several train companies, such as Gatwick Express and Thameslink, survive without a subsidy only because they have a captive audience.

Of the 12 franchisees, National Express is the largest, with nine of the 25 operating companies. Among them are Midland Mainline, Central Trains, Scotrail, Silverlink, Wales and West, and Gatwick Express.

FirstGroup, another bus operator, runs three companies, First Great Western, First Great Eastern and First North Western.

Sir Richard Branson's Virgin group operates the two key inter-city franchises, the troubled west coast main line route between Glasgow and London, in which Stagecoach has a 49% stake, and the tortuous but important cross-country service linking Penzance, Cornwall, with north-east Scotland.

Then comes Stagecoach, which operates South West Trains and the Isle of Wight's Island Line, together with Great North Eastern Railway, owned by the Bermuda-based Sea Containers, which has aspirations to run other inter-city franchises.

Richard Bowker, the new chairman of the strategic rail authority, has made it one of his missions to reduce dramatically the number of companies to a handful.

His plan seems to replicate the pre-nationalisation days of steam when only one rail company served each of London's main termini. So Paddington was home to the gold and green of Great Western, and Euston the maroon of the London, Midland and Scottish railway.

Mr Bowker will be assisted by the growing financial frailty of some of the operators, increasingly starved of government funding. On at least two occasions over the past few years, the SRA has been ready to take control of an ailing company while another operator was found, but at the last minute an outside rescuer came forward.

Competition on the rails has been negligible, except on overlapping services out of some London stations where an inter-city company competes on some surburban routes with the local operator. In these cases, the inter-city operator charges more for season tickets on grounds of extra comfort and speed.

But given the 30% increase in passenger usage over the past five years on a crowded railway, it has been difficult for companies to start cutting each other's throats.

Some have talked grandiosely, for instance, of close combat on the east coast main line between King's Cross and Edinburgh. Two operators would be let loose, running trains to Scotland at 15 minute periods, until one was battered into submission.

This can not be achieved on a two-line track, and unless the infrastructure is expanded never will be. The nearest companies have come to eyeballing each other has been in the case of Virgin and GNER, who both offer fares of around £20 for return journeys to Scotland, but with extremely limited accessibility.

Tom Winsor, the rail regulator, who is charged with encouraging competition, has given up on the job. He is worried about destabilising companies, and says that too much competition might damage the saleability of franchises.

British Rail never allowed itself to be drawn into producing statistics about its performance. Now the industry is swamped with information, highlighting the best and worst performers.

The big companies are the worst performers, beginning with South West Trains. They notched up a 275% increase in delays in total passenger time last year, followed by an increase of 130% from South Central and 115% at WAGN. The best performers were Anglia and Chiltern Railways, who provided better time keeping for passengers.

For too long the train companies have been allowed to follow their own selfish remit, trying to make sure that their profits ensure their survival, while avoiding their responsibilities to passengers.

Mr Bowker wants to change all that. The big new players such as National Express, Stagecoach and FirstGroup could emerge as the new frontline companies, providing the beleaguered industry with the much needed rationalisation it needs. A good start would be to put passengers first. The lead has to come from the top of each company but there is no sign so far that they feel ready to accept the challenge.